t, great quantities of materials are
required for building, and the prices of these materials rise rapidly.
The workpeople who produce these materials then earn high wages, and
they spend these wages in better living, in pleasure, or in buying an
unusual quantity of new clothes, furniture, &c. Thus the demand for
commodities increases, and tradespeople make large profits. Even when
there is no sufficient reason, the prices of the remaining commodities
usually rise, as it is called, #by sympathy#, because those who deal in
them think their goods will probably rise like other goods, and they buy
up stocks in the hope of making profits. Every trader now wants to buy,
because he believes that prices will rise higher and higher, and that,
by selling at the right time, the loss of any subsequent fall of prices
will be thrown upon other people.

This state of things, however, cannot go on very long. Those who have
subscribed for shares in new companies have to pay up the calls, that
is, find the capital which they promised. They are obliged to draw out
the money which they had formerly deposited in banks, and then the
bankers have less to lend. Manufacturers, merchants, and speculators,
who are making or buying large stocks of goods, wish to borrow more and
more money, in order that they may have a larger business, the profit
seeming likely to be so great. Then according to the laws of supply and
demand, the price of money rises, which means that the rate of interest
for short loans, from a week to three or six months in duration, is
increased. The bubble goes on growing, until the more venturesome and
unscrupulous speculators have borrowed many times as much money as they
themselves really possess. #Credit is said to be greatly extended#, and
a firm, which perhaps owns a capital worth ten thousand pounds, will
have undertaken to pay two or three hundred thousand pounds, for the
goods which they have bought on speculation.

But the sudden rise which, sooner or later, occurs in the rate of
interest, is very disastrous to such speculators; when they began to
speculate interest was, perhaps, only two or three per cent.; but when
it becomes seven or eight per cent., there is fear that much of the
profit will go in interest paid to the lenders of capital. Moreover,
those who lent the money, by discounting the speculators' bills, or
making advances on the security of goods, become anxious to have it paid
back. Thus the speculators